Six-year-Avinash loves playing with his toy aeroplane. He throws it in the air and fixes it himself. Planets and stars often come in his dreams, and he talks about space and rockets.
All parents, including Avinashs, want to give wing to their child’s dreams. But, it often gets brushed off as a goal that doesn’t need separate investment planning like that for retirement.
Here are the steps to get your spouse on board.
Make a money date
When was the last time you went on a date with your spouse? How about a money date where you dedicate all your attention to a financial goal. A conversation on saving for a child’s education shouldn’t be a solemn experience.
There are few moments when people are receptive to new ideas. However, a child’s birthday or academic achievements are good life moments to spring up the idea.
Each family has a unique money story, and it might be a good idea to exchange these stories with your spouse. It gets you started as you both discover how your partner grew their beliefs about money.
By letting them share their story, too, partners could ascertain that their experiences were different. Now, it’s time to share family dreams.
Suppose your most prominent dream is to help your child study in an Ivy League. If your child is showing an inclination for specific studies, underscore it. Next, acknowledge doubts and concerns that your spouse might have and be receptive to their point of view. Finally, arrive at a shared dream that convinces both of you.
Understand what needs to be done
Often, a partner thinks that their income can easily take care of future education expenses without the need for separate planning. So, layout the cost of education in current times.
If your child wants to pursue engineering in premier IIT colleges, it costs Rs 10 lakh today and Rs 50 lakh to study medicine in any reputed private college in India. On the other hand, an MBA in an IIM costs Rs 28 lakh, while the cost is about Rs 2 crore in Ivy League universities like Harvard.
Now, share your apprehensions. The cost of education increases at a higher rate than that of salaries. MBA fees in IIM (Ahmedabad) were about Rs 4 lakh in 2009, and it is seven times that at Rs 28 lakh. It has increased by 18% each year!
Similarly, fees in other streams have grown easily at over 10% rates in India. While inflation rates are lesser abroad, rupee depreciation (2-3% annually against the dollar) has made fees in foreign universities costlier.
You can say something like, “I did a little math. Assuming 10% annual inflation, by 2036 (after 15 years), we would need Rs 42 lakh to sponsor private engineering courses, Rs 2.1 crore to fund medical fees and Rs 1.1 crore for sponsoring MBA courses in India. How shall we plan for this?”
Layout the plan
If your spouse is overwhelmed by the target, alleviate their worries. “A financial target of Rs 1 crore or more might seem daunting, but you need not save it all.
The earlier you start the investment journey, the lesser you have to save, thanks to the power of compounding. For instance, you must invest about Rs 41,500 every month for 15 years in equity to sponsor medical studies. After that, it increases to Rs 56,000 for ten years and Rs 98,500 for five years (see table).
Allocations to equities can play an important in one’s investment journey. With a very high inflation rate for education, equity provides the best potential to beat inflation and create more wealth for such significant goals.
Do your research and use a life moment to appraise your partner of your child’s education costs, as well as an investment plan to sponsor it.